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Showing posts from October, 2012

Krugman & Gould, Conclusion

Taleb (above)  also, on October 19th, put his response to Krugman's dissing of Gould in twitter form: "How econ models fragilize (or how Krugman blames others yet does not understand much risk & economics)."

Daniel Davies then took up the twittering cudgels on behalf of Krugman, telling Taleb "your stuff always has one or two things in in that just can't be stood up."

Tweet fight! A wonky tweet fight about economic and evolutionary theory, but a tweet fight still. It came to my attention through Salmon's column, here.

And with that, I have said most of what I want to say on all this, except for three points: who is Daniel Davies?  how much of a Ricardian is Krugman really? and, where do I stand on the underlying Krugman/Taleb debate over trade?

1. Davies? I don't know.  His twitter account has nearly 3,000 followers, though.

2. Krugman and Ricardo. Here I admit my earlier reference was rather slighting. I said Friday that Krugman accepts Ri…

Krugman & Gould, II


How has Taleb made his name?

Look at the above graph. The blue line represents a normal or Gaussian distribution, also known as the "bell curve." Events on the far right or ar left side of that line, where the blue is approaching zero along the X axis, are sometimes call hundred-year storms.

If we think of this in a finance/business context, the blue line may represent what a certain business thinks are its profits for the coming year. The tip of the bell represents the most likely result (a modest profit in line with that of most of its competitors, perhaps.) Toward the right end of the curve you get to ever higher but more unlikely profits, to the left you get losses, and then ever larger losses, though here too the fall-off in the line toward the zerobase of the X axis implies that certain disastrous results are very unlikely.

But what if probabilities in finance don't have a normal outcome distribution? If you draw a flattened curve with "fat ta…

Krugman & Gould, I

Headnote: I have just learned that the great scholar Jacques Barzun has died. It is hardly a life cut short -- he was born on November 30, 1907, so he was about a month short of turning 105. Still, for those of us to whom his life and work mattered, he had come to seem immortal. And in any sense that scholarship can secure: he is. For now, I will proceed with the material prepared for this and the following two entries in this blog. But I will have more to say about Barzun here soon enough.]

Stephen Jay Gould, the paleontologist who did a good deal to educate the non-scientists of the world about the biology of evolution, passed away back in 2002. He might be surprised to learn that his name has now become a bone of contention [a fossilized bone of contention?] among economists.

Of course it isn't all that surprising that there should be cross-fertilization between biology and economics. Ask Malthus about this. Ask Herbert Spencer. Still, my understanding is that this wasn't …

Sinuses and Evolution

I've recently read a fascinating item in, part of its Hominid Hunting blog.

Clues to Evolution

That's the link. If you follow that and read the material, you'll understand the headline of this post.

I will have nothing more to say about it, except ... well, two points. First, the notions discussed there fit in rather nicely with a theme of some of the posts in the precursor to this blog. Those of my readers who have followed me from "Pragmatism Refreshed" will recall my discussions of human evolution as an example of path dependence. If you don't recall that, here's a link.

Second, the next three posts in this blog will all involve Stephen Jay Gould, even though in a rather elliptical manner, so ... perhaps Hominid Hunting will help get you in the right frame of mind for that.

The Nobel Peace Prize

Allow me to get in my own two cents (and yes, I realize I'm rather late to this party) about the EU's receipt of the Peace Prize.

The Peace Prize is awarded by a committee that is selected by Norway's Parliament.  Follow that link for some particulars.

It is fitting, then (nay, it is pragmatically compelling) to observe that Norway isn't a member of the EU.

Norway has twice held referenda to determine whether it would join, and in both cases the go-it-alone faction prevailed: 1972 and 1994.

The Peace Prize is apparently justified this year by a simple and seemingly pragmatic tie: Europe hasn't gone to war since the nations thereof became a single economic unit.

That is pretty clearly a post hoc ergo propter hoc argument, and thus a fallacy. Heck, the US hasn't had a civil war since the EU was created either, but even the Nobel Committee doesn't seem to draw that connection. I'll only note as a counter that Norway itself has managed to stay at Pea…

October Means Exciting Baseball

Meanwhile, in the baseball world, the Orioles/Yankees played a truly epic five-game series to determine which of them would get into the League Championship. [Can include usual grousing here about how the seasons have gotten too long, going into November is ridiculous, remember tjhe lyrics from a certain Broadway show, etc.]

Game three of the series went 12 innings, and ended in a Yankee victory, putting them up two ganes to one. Raul Ibanez was the hero.

Game four was another marathon. This one went 13 innings, and this time the Birds eeked it out, on a RBI double from the bat of J.J. Hardy, to make the final score 2 to 1, and to tie the series at 2 games each.

It is fair to surmise that after those two back-to-back marathons, both bullpens were exhausted. Something had to give.

Unfortunately (for my personal biases) it was Baltimore that "gave." I grew up a Boston Red Sox fan, so my natural reaction in such situations is that the team to root for is the team that isn't w…

Walter Block to go after the Left

Walter Block is one of my favorite free-market oriented scholars.

He is the author, most notably, of a sparklingly iconoclastic book called Defending the Undefendable, the various  chapters of which say positive things about: pimps, drug pushers, drug addicts, blackmailers, ticket scalpers, and dishonest cops!

The argument in favor of legalizing blackmail has been especially influential: not because there has been any groundswell of support for such a policy change but because the academic reception of that chapter has shown that Block hit a nerve, among free market advocates.

Block's case for legalizing blackmail drew responses in particular from Robert Nozick, Richard Posner, Richard Epstein,  and James Lindgren, an honor role of libertarian theorists. Each gave his reasons why he was unpersuaded. Block has responded.

Note that blackmail (for purposes of this debate) is different from extortion. Blackmail is the threat to do something you would otherwise have a right to do, …

Thunder Down Under: Gillard v. Abbott

Aussie politics. Viewed from a safe distance.

I turn 54 today. But let's talk about something else.

Peter Slipper -- the fellow who appears to be observing his nap time in the photo above, was until quite recently the Speaker of the House of Representatives in Australia. He got into trouble for a number of reasons, among them sexually harrassing emails and text messages he sent to a (male) subordinate, James Ashby.

In the context of those messages, he made remarks about women that, when they became public, were labelled misogynist and fed into a campaign by the  Liberal Party (a center-right party), led by Tony Abbott, to force Slipper to quit as Speaker.

The ruling party in Australia since 2007 has been the Labor Party (spelled in the way with which Americans are familiar, the way that annoys Brits, without a "u"), and the PM is that party's leader, Julia Gillard. Gillard for a time seemed to be standing by Slipper in his efforts to remain Speaker.

Indeed, althoug…

Gertrude Himmelfarb

Gertrude Himmelfarb has a lengthy discussion of William James in a recent weekend issue of TheWall Street Journal.

This discussion was apparently inspired by a recent book by the French philosopher, Alain de Botton, Religion for Atheists. Botton thinks religion simply false (the world is just a mechanical push and pull of undesigned particles), but thinks that religions ( a word both plural in semantics and institutional in emphasis) valuable nonetheless, because they offer music, architectural achievement, rituals, community, feasts, etc. Atheism can't do that, and the failure of the old Comteans rather illustrates this point, so Botton thinks atheists should make their peace with religions.

That is just a starting point for Himmelfarb, though, who wants to talk about James, not Botton.

As Botton is an unorthodox sort of atheist, a neo-atheists if you will, James was an unorthodox sort of believer, a neo-believer.

About half way into her essay (at a point when she seems to ha…

Jed Perl

The latest issue of Harper's has a round-up, by Joshua Cohen, of new books.

The one that catches my eye is a comment on a collection of the writings of art critic Jed Perl. I've probably read a good chunk of that book, as I'm a fan of Perl's work as it appears in The New Republic.

Unfortunately, Perl's new book, Magicians and Charlatans, looks a little pricey for me.  So I'll confine myself to just quoting here what Cohen writes about it:

"[T]his miscellany's greatest recommending stretches are its critiques of what is essentially unreal: the art market. Shock, that old weapon of Dada and Surrealism, concussing sensibilities since World War I, has become a marketing manifesto licensing a Christ soaked in human urine (Andres Serrano's Piss Christ) and a Mary slathered in elephant dung (Chris Ofili's The Holy Virgin Mary) not as expressions of rage but as provocations of PR ....The museum is converted into its architectural double, the bank, as …

Money Market Funds, Part II

So, continuing yesterday's discussion: what do Austrians say about MMFs?

Let us be clear about the analogy Krugman draws between MMFs and banks. The term "fractional reserve" just means that the bank doesn't have all the money in the vault. Yes, there are a lot of checks floating around that represent the amount of money the bank is responsible to pay on demand and, yes, in the event of a bank run this is a dangerous situation.  The bank only has some small fraction of the money in reserve. Hence the term.

So: what do Austrians say about that? Is this a case where their hard money views come into conflict with their laissez-faire views, and where they ought in consistency with the former to demand that the government close these dangerous fractional reserve institutions down as so many embezzlers?

Well, there are different approaches within this broad school of thought. But the general line of thought is well stated by Detlev S. Schlichter, in his recent book, Pap…

Money Market Funds, Part I

Nobel Prize winning economist Paul Krugman, pictured here, whose writings for the mainstream press have made him easily the most visible Keynesian of our day, issued a challenge to Austrian economists recently.
For those of you who may be new to such discussions, I'll explain the jargon. The Austrian school is the tradition of Hayek and Von Mises, [and for the record, Hayek too received a Nobel Prize], a school built on a subjective understanding of economc value, that is, the view that something has value because one or more individuals want it -- regardless of, say, how much labor or how impressive a technology was necessary to create it. Also integral to the "Austrian" school are distinctive views about economic calculation, the demand for hard or honest money, the bases of interest rates, and certain meta-theoretical ideas as to how economics ought to be studied.

What especially sticks in Krugman's craw, though, is the Austrian view of the business cycle. Austr…


"The moment one tries to define what habit is, one is led to the fundamental properties of matter. The laws of Nature are nothing but the immutable habits which the different elementary sorts of matter follow in their actions and reactions upon one another." So writes William James early in the fourth chapter of Principles of Psychology.

Is he, as may at first appear, playing a semantic game here?

I think not. We say that the electrons of an atom have a "habit" of acting in various law-like ways in a sense somewhat stronger than metaphor. After all, on such a basis we can also say that our neurons have a habit of acting in certain ways. It is a fair guess that certain thought patterns correspond to pathways of electrocal charges through a possible line of our neurons, and that once these pathways have been oft followed, their continued use in the future becomes more likely. Such a conjecture would provide a physical basis for habits of thought.

We might say too t…

Video Games and Intellectual Property

I'd like to thank Jack Schecter, of the "IP Insight" column of The Federal Lawyer.

His column in the October/November issue of that periodical, called "Grand Theft Video: Judge Gives Gamemakers Hope for Combating Clones" proved surprisingly thought provoking.

Regular readers of this blog and its precursor know that I follow IP issues at least casually

Schecter discusses a case out of the federal district court for the district of New Jersey, Tetris Holding v. XIO Interactive, the fight over a clone of the famous video game "Tetris." The clone, by XIO Interactive, is known as "Mino."

The case turned on the idea/expression dichotomy in copyright law. The defendant contended that it could use the idea behind Tetris (which is accurate), plus any functionally necessary attributes of the game. Further, it contended that pretty much everything about Tetris fell into one or the other of those categories, so it was free to copy.

For a summary of …

Price Parity: Back in the day

Almost nobody talks about "price parity" any more. A few decades back the term was the common coin of politcal debate, central to arguments about agricultural price subsidies.

During the depression, Rooseveltian economists decided that a period about 20 years before that, 1910-1914, had been a golden age for farmers. The price of goods farmers had to buy (made by urban folk) were in a "parity" with the price of the goods they were selling, their crops and slaughtered critters. So (the Brain Trust decided) the goal of federal policy ought to be to get back to that parity.

Ag subsidies, direct and indirect, were justified for over the next 30 years or so on the basis of helping farmers return to or maintain parity, defined by pre-WWI price relationships.

These subsidies were by the the 1960s receiving heavy critical fire all along the political spectrum, and although the critics didn't manage to stop the subsidies (which are still very much with us in the 21s…

American Express Appointment Book

The October pages of my Amex appointment book inform me about Austin Texas. Here are two facts we might all want to hug close to our hearts:

1) Austin City Limits is the longest-running concert music program on American television, and

2) With the 2008 opening of its Long Center for the Performing Arts, Austin acquired a world-class forum for its orchestra, opera, and ballet companies.

 We're also informed of the superb skyline views from the front terrace of that Long Center.